Rating agency Crisil has revised India’s gross domestic product (GDP) growth to 6.5 per cent for the current fiscal, supported by expectations of above-normal monsoon, rate cuts and the government’s rural support schemes. The India Meteorological Department sees the above normal monsoon, and the arrival of the southwest monsoon is expected to boost agricultural production.

The department expects above-normal monsoon for fiscal 2026 at 106% of the long-period average. It will aid discretionary spending, noted the report. Crisil also expects another rate cut in the current fiscal year, which is likely to further boost domestic demand. The Reserve Bank of India (RBI) has already cut rates by 100 basis points in the ongoing easing cycle, which has led banks to soften lending rates.

The growth in output in investment-related goods reflects a healthy rise in the government’s (centre plus states) capex in May. Central government capex rose 38.7 per cent (nominal terms) in May, and data for 17 major states indicate that cumulative capex surged 44.7 per cent on-year in May. Investment-related goods performed well in May, output growth in infrastructure and construction goods picked up 6.3 per cent vs 4.7 per cent.

Additionally, “Income tax cuts and expected spending on rural support schemes as announced in the budget for fiscal 2026, too, will support private consumption,” noted the rating agency. However, the report adds that tariff hikes are likely to hit goods exports, “the announced reciprocal tariffs (by the US administration) are expected to come into effect from July 9.

The tariff hikes are likely to hit goods exports in fiscal 2026, while private investments may be impacted by global uncertainty.” For the month of May, growth in the Index of Industrial Production (IIP) softened to 1.2 per cent on-year in May from 2.6 per cent in April, marking its lowest level since August 2024.

A contraction in the electricity sector and softer growth in manufacturing were the factors weighing down on IIP in May. Along with consumer-oriented and electricity sectors, pharmaceuticals, chemicals, and textiles reflected a decline in output on-year. On the other hand, investment-related goods experienced a more positive growth trend, and Export-oriented sectors displayed a mixed performance.